Wednesday, January 22, 2014

Expect a statement from Carney ASAP

Unemployment rate drops to 7.1%

The UK unemployment rate has dropped to 7.1%, the Office for National Statistics has said. The number of people out of work fell by 167,000 to 2.32 million in the three months to November.

Posted by reticent @ 09:46 AM (4973 views)
Please complete the required fields.



15 thoughts on “Expect a statement from Carney ASAP

  • I think one sneaky aspect of Osbournes minimum wage populist plea is that it will keep the unemployment rate up and reduce the need to publicly renounce an interest rate rise. He might even start getting more generous. Unemployment is a fiscal tool, as Lawson said unemployment in the north is a price worth paying to control inflation.

    Reply
    Please complete the required fields.



  • Interesting theory.

    One of the great mysteries of economics is that there is little to no evidence that the minimum wage raises unemployment. In fact, there’s more evidence to suggest the opposite, but the consensus is that it has no discernible effect on employment at the levels it has so far been applied.

    Not sure how true that is in this country, however, as regional median salaries vary so much. £6.31/hour is only 20% less than median pay in some parts of the country.

    I hadn’t heard that from Lawson. There appears, to my mind, to be a certain amount of that going on at the moment (letting the north suffer to hold back nationwide stats).

    Reply
    Please complete the required fields.



  • Hi Stillthinking – I see the BoE have already come out and said there’s no need to raise rates when unemployment reaches 7%. Carney needs to be careful not to lose all credibility – the whole idea of forward guidance is that it gives markets certainty, but what certainty is there if the goal posts get moved every 5 minutes?

    Reply
    Please complete the required fields.



  • Forward guidance was just a rebranding, renewing and tweaking of the expired 2 year static interest rate promise made by Mervyn King in late 2011.

    People believed Mervyn King because the economy reentered recession around that time (although this recession has since been revised away). However, there was concern at the time that Mervyn couldn’t guarantee anything. A spike in inflation would have forced the MPC’s hand. So Carney simply renewed his promise with conditions rather than a timeframe, which was a much more sensible move.

    Furthermore, he never said he was going to raise rates once unemployment was below 7%. He simply said he wasn’t planning on doing the opposite unless inflation took off. That’s a very different promise.

    However, we are fast approaching the point where the only major reason to keep rates low will be to protect zombie homeowners. It will be interesting to see how that one plays out politically. A rate rise by end of 2014 would surely hit house prices and have a massive impact on the election, but they may approach the point where they have no choice but to raise rates around then.

    Reply
    Please complete the required fields.



  • You are assuming the next rise in rates is up.
    If inflation falls to 1.5 % we could see 0% interest rates and more QE to avoid deflation
    I would not want to bet on the next move being up or down.
    How this plays out with house prices I do not now.
    They may just ignore then as the are so frightened of deflation.

    Reply
    Please complete the required fields.



  • Reticent, I get that, but if every time we reach the threshold mentioned in future guidance, we simply get another statement which says we’re still not reducing rates, then sooner or later he will lose credibility. Guidance isn’t guidance if you say on the one hand it’s not a guarantee, and on the other, even when we reach that point we’re doing nothing – it’s meaningless waffle which gives the impression that they haven’t got a clue what they’re doing.

    Your final paragraph gives me a warm fuzzy feeling… time will tell.

    Reply
    Please complete the required fields.



  • It is amazing how many people have amnesia where interest rates are concerned. Many people are horrified that interest rates could rise a few percent and believe it will never happen again. – they believe almost negative interests rates are the ‘new paradigm’

    Reply
    Please complete the required fields.



  • It is amazing how many people have amnesia where interest rates are concerned. Many people are horrified that interest rates could rise a few percent and believe it will never happen again. – they believe almost negative interests rates are the ‘new paradigm’

    Reply
    Please complete the required fields.



  • Like a low interest rate bubble that’s supporting a whole load of bubbles (stock, housing, bonds)

    Reply
    Please complete the required fields.



  • Sterling jumped to $1.65
    I think it is heading to over $2.

    Reply
    Please complete the required fields.



  • Osbourne can change the employment rate up when he shuts down the bloated state sector in the Labour heartlands, which I believe will start imminently. His plan, which is a fairly good one IMO, he has to square the circle with increasing property supply, increasing property prices (political imperative to stay in office) which he has by increasing the availability of credit while building. UK denizens always borrow to the max like crazy folk. So that bits done. He is borrowing at zero considering he takes the profits of the BoE back to the treasury and his opposition party have already said that they will spend to the limit, so there will never be a debt paydown by the Tories, they will run the debt up to the max.

    The only way going forward to keep interest rates low is to either tank the housing market or start offloading state workers and use unemployment as control. This is going to be the trap for Labour because they can’t choose either option. Having said that, I believe Labour would tank the economy. Milliband is a marxist, he believes the capitalist system is inherently doomed anyway, probably why he has already started announcing price controls. If the electorate go for Labour then the UK will tank and the conservatives will only be out of office for a single term . You can increase unemployment by increasing the minimum wage and by dumping waste of time Labour voting state workers. Its a good plan. There isn’t going to be an interest rate rise. I don’t why people still buy into that, obviously no. Credit controls yes, any other options yes. Interest rates no. They would bankrupt the country, not an option.

    Reply
    Please complete the required fields.



  • stillthinking – interesting analysis. Thanks.

    Reply
    Please complete the required fields.



  • ST
    What bloated sector would that be? How will sacking people improve employment. Re-employ them on zero hours contract at the minimum wage?

    As for dumping waste of time workers, I think your politics is getting the better of your thinking.

    Reply
    Please complete the required fields.



  • If you mean I am affected by my view that they are Labour voting scumbags with their fingers in the till who should be drowned in a bucket, then thats not an unfair inference.

    Reply
    Please complete the required fields.



  • Thanks for your subtle analysis stillthoughtful !

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>